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As Xiaohongshu Seeks $500M, A Look At China’s Super-Late-Stage Market

After raising a $300 million Series D last year at a $3 billion post-money valuation, China-based Xiaohongshu is looking for more money. News broke late last week that Xiaohongshu, a social ecommerce player in China, is on the hunt for $500 million more.

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The company had raised less than $500 million before this round, making the potential round a huge deal for the firm. Xiaohongshu, which translates to “little red book” (which per QZ is not a reference to that other Little Red Book), is a notable combination of tips, ecommerce, and social interactions.

And the company, and its potential round, are another good reminder of the amount of attention that we should pay to China’s tech market. It’s also a reminder of the gap between how much we do today, and how much we should.

Super Giant Slowdown?

Eye-catching in the Xiaohongshu news is the fact that the firm’s possible raise is nearly contra-trend. As our own Jason Rowley reported in late May of this year, China’s share of supergiant rounds has fallen over time. Crunchbase News defines supergiant rounds as those of $100 million or more, and hypergiant as those totaling $250 million or more.

From a leading position in June 2018 to a diminished percentage, the time in which China-based companies accreted nine-figure rounds every other minuted seemed to have passed. A $500 million infusion, however, would undercut the narrative somewhat.

As Xiaohongshu could present a comfortably contrary data point, we decided to dredge up some other conflicting entries to the concept that China’s super-late-stage market is slowing down.

Sourcing from Rowley’s rolling coverage of rounds this year that start at $250 million and go up, we snagged a few of the most recent China-based rounds that meet the threshold.

A common theme is that one often sees many of the same firms investing in these large Chinese rounds. In May, Beijing-based Megvii raised a $750 million Series E that valued the company at over $4 billion. Alibaba Group (rumored to be part of the possible Xiaohongshu round) also participated in that financing. The AI company is behind the Face++ facial recognition engine and is rumored to be going public later this year.

Overall, April was a busy month for Chinese startups raising mega rounds. Tencent Trusted Doctor raised $250 million in a round led by Tencent Holdings, Country Garden Holdings and Sequoia Capital China (rumored to also be part of the possible Xiaohongshu round) valuing the company at over $1 billion, post-money.

Also in April, Hozon Automobile, a Hangzhou, China-based company developing all-electric automobiles, secured around $447 million in a Series B. Another all-electric vehicle maker, Enovate Motors, raised around $298 million in a massive Series A.

Finally in March, Nanjing-based T3 Mobile Travel Services, a joint venture of automakers developing a ride-hailing service and self-driving car technology (who isn’t?), raised a giant Series A. It hauled in approximately $1.46 billion from its crew of automotive corporate backers (FAW Group, Changan Automobile, among others).

While the Xiaohongshu round is still pending, and we don’t even know the price it could command, it’s a bit less lonely than we initially imagined. Good times are still here for a while yet.

Illustration: Li-Anne Dias

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